Insurance policies that provide auto physical damage coverage (property coverage for autos) offer the following types of coverage:
· Collision
· Other than collision (also called comprehensive)
· Specified causes of loss (used primarily in commercial auto policies)
Collision covers damage to an insured motor vehicle caused by its impact with another vehicle or object or by its upset or overturn.
Other than collision (or Comprehensive) is a type of open perils (all-risks) because it covers any “direct and accidental loss” that is not caused by collision and is not specifically excluded such as fire, theft, vandalism, falling objects, flood and various other perils.
Specified causes of loss is a less expensive alternative to comprehensive coverage in commercial auto policies. This coverage is otherwise called named peril coverage.
Causes of Loss Often Excluded
Reasons for Exclusions
· To avoid covering uninsurable losses.
· To avoid insuring losses that could be prevented.
· To eliminate duplicate coverage.
· To eliminate coverage that most insured do not need.
· To eliminate coverage for exposures that requires special handling by the insurer.
· To keep premium reasonable.
Catastrophe Perils
Some perils that affect a great many people at the same time are generally considered to be uninsurable by insurance companies, since the resulting losses would be so widespread that the funds of the entire insurance business might be inadequate to pay all of the claims.
For this reason, almost all property insurance policies exclude coverage for losses from catastrophes such war and allied perils, nuclear reaction and allied perils, Act of God perils like earthquake, flood losses, etc.,
Maintenance Perils
Maintenance Perils that are excluded from most policies include: -
· Wear and tear
· Marring and scratching
· Rust
· Gradual seepage of water
· Damage by insects, birds, rodents, or other animals.
Such losses are generally uninsurable because they either are certain to occur, over time, or are avoidable through regular maintenance and care.
Property Loss Exposures
